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Buying a House Without a Mortgage?

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Seller financing

The Top 3 Alternatives to a Traditional Mortgage - There are plenty of reasons why a traditional mortgage may not be right or possible for you at this time – but that doesn’t mean that you can’t go out and buy a new home! Sure, mortgages are harder to qualify for than they were in the past. Things like a low credit score, a bankruptcy, a foreclosure, or an irregular income can all get you caught up in a sea of red tape. For whatever reason, if a traditional mortgage isn’t an option, there are plenty of other ways to finance a home. Here are our top 3:

1.  Rent to own/lease to own
Sometimes, sellers offer the option of renting to own or leasing to own. This process usually consists of paying a higher rent level than market value, with a portion of the rent going toward a down payment. After a certain time period, you’ll have the option of purchasing the house from the seller.
Typically, a rent to own option allows you to walk away from the home at the end of a period without having to buy the house. Unfortunately, should you decide that house isn’t for you, you will sacrifice all of the extra money you paid! This is a good option for many people who may need a couple of years to secure bank financing. It’s also a great option if you think there is a possibility you could relocate in the future and don’t want to be tied down to a traditional mortgage.  

2.  Seller financing
Typically, sellers will offer this option when their home has been on the market for a long period of time, or if they need to sell the property quickly. A seller may also consider this option because they can make a profit off of the interest in the home. After you and the seller reach an agreement, a promissory note is drawn up.  This promissory note includes the agreement of the principal, the interest rate, how the loan will be repaid, and what would happen should you default on the loan. Some sellers shy away from this option, because they’re suspicious as to why a buyer isn’t getting traditional financing through the bank. If you are pursuing this option, be prepared to answer some questions and ease the seller’s fears about paying the loan back.  

3. Borrowing from your whole life insurance policy
If you have a whole life insurance policy, you know that it accumulates a cash value over time, in addition to earning dividends and interest. As long as you have made regular premium payments into your policy, you can borrow against the cash value of your policy. With this option, you won’t have to qualify for anything or answer anyone’s questions. However, if you don’t pay the money back, it will reduce the value of your policy. So, before considering this option, talk to your insurance agent to find out exactly how it will affect your policy, if it’s taxable, and any other ways it could potentially affect your benefits.  

When you consider these different options, make sure that you do some serious homework. That way, you’ll understand every possible risk that may be associated with alternative financing opportunities. That way, you’ll be able to get the home of your dreams, without having to deal with any surprises
 


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